CASH DISCOUNT/TRADE DISCOUNT, CREDIT NOTE / DEBIT NOTE

[SAFETAB LIFESCIENCE]

Dear Team,

What is the major difference from Cash Discount and Trade Discount. We are giving discount to our customers for making payment prior to agreed due date / credit periods. Discount is not worked on the basis of any percentage on the basic selling price. It is based on the number of days of payment made prior to the due dates. Whether we have to charge GST on the Discount amount. Whether we have to give Credit Note or we can get Debit Note from party or any one of the both can be used.

Whether, the issuance of Credit Note without GST is a mistake and leviable penalty under GST act. Because, some of our clients are asking Credit Note without GST and some of our clients are asking Credit Note with GST. The parties asking Credit Note with GST is giving their Debit Note also for the same transaction (i.e) the discount allowed by us. We are taking credit of ITC by using their Debit Note. Is it correct or not ??? (or) shall we have to reduce our GST liability by using our Credit Note declared in GSTR-1. Accounting wise, amount wise both are correct. But, as per GST act, which one is to be used.

Whether, The GST on Discount amount should be mentioned in Credit Note ?? Is it mandatory ???

AI Summary

Discount treatment under GST: pre-supply discounts reduce taxable value; post-supply discounts require linkage or ITC reversal.
GST classifies discounts as pre-supply or post-supply. Pre-supply discounts separately stated on the invoice reduce taxable value. Post-supply discounts reduce taxable value only if linked to the invoice, agreed before or at supply, and the recipient has reversed any input tax credit attributable to the discount. Suppliers must issue credit notes showing taxable value, tax rate and tax credited within the statutory timeframe; recipients cannot replace supplier credit notes with their own debit notes for adjusting GST liability.